What defines an "accredited investor"?

An "accredited investor" is specifically defined by the Securities and Exchange Commission (SEC) based on certain financial criteria. A key aspect of this definition includes individuals who meet specific income or net worth thresholds. For instance, to qualify as an accredited investor, an individual generally must have a net worth of over $1 million, either individually or jointly with a spouse, excluding the value of their primary residence. Alternatively, individuals can qualify by having an income exceeding $200,000 per year for the last two years, or $300,000 combined with a spouse.

This designation allows accredited investors to participate in investment opportunities that are not available to the general public, such as certain private placements and hedge funds. The rationale behind these criteria is to ensure that these investors have the financial sophistication and capacity to withstand potential losses associated with these higher-risk investments.

The other answer choices do not meet the established criteria for defining an accredited investor. Having a bank account in good standing, completing a finance degree, or possessing experience in trading stocks, while potentially useful attributes, do not satisfy the specific financial requirements that qualify someone as an accredited investor. Therefore, the option focusing on income or net worth thresholds is the accurate definition.